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OpenMarket: Property Rights

Ten years ago today, the U.S. Supreme Court issued a 5-4 decision upholding the City of New London, Connecticut’s “right” to condemn Connecticut homeowners’ properties, transfer them to a state-created entity called the New London Development Corporation, which would then transfer those properties to a private developer of a planned mixed-use redevelopment project aimed at supporting an adjacent Pfizer research facility. (Land of the free, right?) At issue was the interpretation of the Fifth Amendment’s Takings Clause “public use” standard.

The Court relied primarily on three previous cases involving the “public use” standard:

Berman v. Parker (1954)—This case upheld the right of municipalities to declare entire areas blighted, even if the parcel in question isn’t blighted. It also accepted Washington, D.C.’s argument that the area condemnation was necessary to prevent future blight. An all-around terrible decision.

Hawaii Housing Authority v. Midkiff (1984)—This case involved the redistribution of land titles in Hawaii. When the state moved to seize the properties, 49 percent of land in Hawaii was controlled by government and 47 percent was controlled by 72 private owners. The Court failed to recognize the central problem with land distribution in Hawaii at the time: almost half of the property was controlled by government, which created massive real estate market distortions—in addition to Hawaii’s odd economic history. While Justice Sandra Day O'Connor wrote the majority opinion in Midkiff, she also wrote a scathing dissent in Kelo, where she regretted her broad language in the Midkiff ruling that opened the door for a terrible opinion like Kelo.

Ruckelshaus v. Monsanto Co. (1984)—This case involved chemical industry trade secrets. While it was solely about intellectual property, the Court argued that this case was relevant because it dealt with public use in a purely economic context. The enormous distinctions between intellectual property and real property were lost on the majority in Kelo.

The result was the majority definitively watering down “public use” to a weak “public purpose” standard, leaving us with a “public purpose” standard that can be satisfied in the following situation: the government condemns your house in order to transfer it to a private developer, which the government expects the property will be put to higher use under the planned redevelopment and thus will increase its tax base. Think that couldn’t happen in the U.S.? Well, it did and was supported by the majority of the Supreme Court in Kelo.

Last week, Alternet posted yet another bogus smear on the libertarian billionaires Charles and David Koch. It has since been reposted by Salon.com. The article summarizes the “findings” of a report titled, “The Koch Brothers’ Record on Civil Rights and Race,” which was produced by an outfit called “The Bridge Project.” This front group is really an arm of a super PAC called American Bridge 21st Century, which was founded by Democratic party activist David Brock and in 2012 was described as “the hub of the left” by Roll Call.

Competitive Enterprise Institute President Lawson Bader has said, "What CEI does, on a daily basis and at its core, is to celebrate and defend free enterprise," and "free enterprise is just another phrase for what I call the ‘freedom to prosper.'"

Lawson makes it clear that "prosperity" does not necessarily mean accumulation of possessions, but enrichment of one’s own life and those of others through individual choice. Free enterprise means freedom to pursue various options, and "we who defend economic liberty view these endeavors with a non-judgmental eye, recognizing them as the choices free individuals make to realize their dreams,'" he writes.

These thoughts on the freedom to prosper have been on my mind since last week after the passing of two individuals -- one of whom I was privileged to know -- who used what limited freedom they had in the "Jim Crow" system of state-enforced segregation to blaze paths to prosperity for themselves and others.

Maya Angelou, who died May 28 at 86, was a pivotal poet and author and recipient of the Presidential Medal of Freedom. But this was far from the sum total of her varied career. As her Washington Post obituary notes, "She sang cabaret and calypso, danced with Alvin Ailey, acted on Broadway, directed for film and television and wrote more than 30 books, including poetry, essays and, responding to the public's appetite for her life story, six autobiographies."

Herb Jeffries, whom I had the privilege of interviewing for publications such as The Wall Street Journal, The Washington Times' Insight magazine, and American Profile (the latter of which was cited in his Time magazine obituary), died May 25 at 100. Before he turned 30, Mr. Jeffries had become the first permanent male vocalist in the orchestra of jazz great Duke Ellington, as well as the creator and star of a pioneering series of all-black singing cowboy movies that dealt a blow against racial stereotypes.

After entertaining the World War II troops overseas upon joining the Army Special Services division, Mr. Jeffries began operating night clubs in post-war Europe. He returned to the U.S. in the 1950s, where he resumed his singing and acting career. A resurgence of interest in his work, coupled with the fact that he still had a beautiful baritone well into his 90s, led to a star on the Hollywood Walk of Fame, a command performance at the White House, an numerous other honors bestowed on him in the last 15 years of his life.

In the electric power industry, if you run an extension cord across the street to serve another, you go to jail. The local utility has a protected monopoly. We’ve put most of that "public utility" vision behind us in communications. Wired and wireless and satellite options abound for Internet service; we'll likely see blimps and communications drones, and who knows what else.

Yet special interests still want the Federal Communications Commission (FCC) to regulate the content flows and grid infrastructure, the prices and services of the Internet via something called net neutrality. They actually are quite open about wanting government regulated monopoly power.

Neutrality proponents want to inflict a "Mother-May-I" method of operation on the Internet; they want planning boards and regulatory affirmation of content carriage arrangements and of infrastructure deals.

It's not a bright new idea, and not even one rooted in a plausible belief in natural monopoly, or one informed by angelic visions of "common carriage. Regulation like net neutrality devolves into cronyism. It was also rooted in cronyism.

Early telecommunications and power networks were highly competitive, with duplicative infrastructure. The powerful didn't like the competition. The cronies got a franchise and guaranteed profit, everybody else got shut out, and the effects still linger.

The Federal Communications Commission (FCC) will issue proposed rules May 15, rules expected expected to allow premium pricing for Internet fast lanes alongside the lane we have now, for those willing to pay.

The open-access tech utopians aren't amused; They see the Internet as some kind of magical public resource, as something that popped fully formed out of nowhere, and need never change. In the modern style, they have demands that others must fulfill, and want to set the terms for others' property deployment.

Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

There's nothing wrong with many fast and many slow lanes on the "Splinternet" of tomorrow. We should have those without new FCC rules setting the terms as both content and infrastructure firms expand and can discipline one another. Anyone who stands in the way of that evolution is the threat to openness and information flow.

As ever escalating premium services in multimedia emerge, particularly in tomorrow's world of 3D and holograms, today's average speed will pale in comparison. A mere background hum.

That hum will resonate louder as the premium lane and lanes escalate, making everyone better off. All FCC is going to do is bog the process down.

No, neutrality advocates seek their own control over the Internet's infrastructure and content, explicitly demanding common carriage (and presumably an end to investment). And the new rulemaking's veneer of liberalization aside, the real problem is that FCC actually seeks broader new forms of regulation over Internet technologies as such, and was granted that authority in court early this year.

Last night, CEI filed suit against the United States Department of the Interior and the National Park Service for failing to produce documents in response to two pairs of Freedom of Information Act requests. Those requests, sent to them way back on October 9, dealt with these agencies' closures of private businesses and privately-run tourist attractions in the 2013 federal government shutdown, and also with their closures of public monuments and spaces, which are often open to the public even when no federal employee is on duty.

The agencies have neither produced documents, nor set an estimated date for when they will be produced, nor indicated how many documents they might produce or withhold, even though FOIA contains a 20-day deadline for an agency to comply with a FOIA request. They have not provided the basic information that FOIA requires within that deadline, such as telling us how many documents they expect to produce (or, if the documents are exempt from production, how many they will withhold under a valid FOIA exemption), even though that information is required under the appeals court ruling in C.R.E.W. v. F.E.C., 711 F.3d 180, 186 (D.C. Cir.2013).

During the shutdown in early October, these agencies closed down, or blocked access to, many private businesses that had apparently been allowed to operate in earlier shutdowns under prior Presidents (even as politically-connected businesses were allowed to remain open). After lawyers and legal commentators suggested that these closures of private businesses were illegaldepartures from past agency practice, I filed FOIA requests seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made. Of all the agencies involved, the National Park Service was probably the worst offender, according to CEI's Myron Ebell. A judge later ruled against the National Park Service’s closure of a state park used by children, and against the U.S. Forest Service's suspension of timber operations.

The Obama administration's behavior during the shutdown was controversial, to say the least. As part of the so-called "shutdown" (which did not actually shut down most of the government -- most federal workers keptworking), itshut down tourist attractions -- even when doing so cost the government more money than leaving them open. It rented costly barricades to keep people out of open-air outdoor monuments that don't need to be manned, and are typically open even when unstaffed (like the World War II Memorial).

And it sent Park Police to drive people out of privately-run tourist attractions on public land, like the Claude Moore Colonial Farm, endangering tourism-related jobs in the process. On October 2, PJ Media’s Bryan Preston reported that the federal government was “ordering hundreds of privately run, private funded parks to close,” using the government shutdown as an excuse.

Can a country seeking to welsh on its debts invoke sovereign immunity to evade not just court orders to pay those debts, but also post-judgment discovery aimed at collecting on those judgments? Can it do so to prevent not just discovery directed at it, but also at third-party banks? Most importantly, perhaps, can it do so even though it contractually waived sovereign immunity? The answer is yes, according to Argentina, which is seeking to stiff many of its bondholders. Thankfully, the U.S. Court of Appeals for the Second Circuit disagreed with this attack on property and contract rights in a 2012 decision.

But amazingly enough, the Obama administration has taken Argentina’s side at the Supreme Court. It is joined by the government of France, which has experienced downgrades in its credit rating due to stubbornly-high government spending under Socialist Francois Hollande that consumes well over half of France’s economy. The willingness of the Obama administration to take Argentina’s extreme position is disturbing given that the Second Circuit’s ruling was unanimous.

CEI and several former State Department officials have filed an amicus brief asking the Supreme Court to uphold the appeals court’s ruling, and reaffirm the availability of the post-judgment discovery needed to protect property and contractual rights. The former State Department officials include counsel of record John Norton Moore, former Counselor on International Law to the Department of State; Robert F. Turner, former Deputy Assistant Secretary of State for Legislative Affairs; Abraham D. Sofaer, a former federal judge and former Legal Adviser to the Department of State; Professor Malvina Halberstam, former Counselor on International Law to the State Department; and Davis R. Robinson, former Legal Adviser to the State Department. John Norton Moore, who teaches international law and national-security law at the University of Virginia, was extensively involved in drafting the Foreign Sovereign Immunities Act (FSIA) involved in the case. Judge Sofaer was appointed by President Carter to the federal bench in 1979.

In last October's government shutdown, the Obama administration closed down, or blocked access to, many private businesses that had been allowed to operate in earlier shutdowns, such as during the Clinton administration. After lawyers and legal commentators suggested that these closures of private businesses were illegal, and pointed out that they were an unexplained departure from past agency practice, I filed a series of Freedom of Information Act (FOIA) requests with the agencies that carried out these closures -- the National Forest Service, the National Park Service, and the Department of the Interiors -- seeking to find out which officials were responsible for these improper closures, and how the decision to close them was made.

(Testimony by CEI's Myron Ebell suggests that the National Park Service was probably the worst offender among all the agencies. A judge later ruled in favor of parents' legal challenge to the National Park Service's closure of a state park used by their children, and other judges apparently issued temporary restraining orders against things like the suspension of timber operations. A Federal judge was apparently about to issue an injunction against the closure of private concessions in National Forest Recreation Association v. Tidwell when the shutdown finally came to an end on October 17.)

In FOIA requests submitted on October 9 and 10, I sought information about the orders closing down these businesses, how the targeted private businesses were selected (some politically connected businesses were spared being closed), and about the policies the government relied upon in shutting them down. Months later, long after the legal deadline for responding to my FOIA request, the National Park Service and the Department of the Interior still have not produced any documents at all, even though they were legally required to respond within 20 working days after I made my request.

In March, the Forest Service did finally respond, but its response -- producing only agency communications that occurred after the shutdown ended -- suggests that it has withheld, or failed to search for, the most interesting (and potentially incriminating) documents.

The Supreme Court has decided an important property rights case in favor of the private property owners and against the claim of the federal government by an eight-to-one majority. Surprisingly, the Court’s liberal Justices, with the exception of Justice Sonia Sotomayor dissenting, signed Chief Justice John Roberts’s March 10 decision. In reversing the Tenth Circuit Court of Appeals, the Court ruled, in Brandt Revocable Trust et al. v. United States, that a right of way granted to a railroad in 1908 did not revert to the federal government when the railroad abandoned the tracks in 2004.

The original right of way was over federal land, but 83 acres of that land were patented in 1976 in a land swap with the U. S. Forest Service. The Department of Justice argued that even though those 83 acres had been turned over to private owners, the right of way over that now-private land had reverted to the federal government when the railroad stopped running. Arguing for the Brandts, Steven J. Lechner of Mountain States Legal Foundation stated that the right of way was an easement granted for a particular use, and therefore had expired when its intended use, operation of a railroad, had ended.

The Chief Justice’s opinion relies heavily on the 1942 Supreme Court decision, Great Northern Railway Company v. United States (315 U. S. 262), in which the Court agreed with the federal government’s argument that the General Railroad Right of Way Act of 1875 only conveyed easements. The majority opinion stated:

More than 70 years ago, the Government argued before this Court that a right of way granted under the 1875 Act was a simple easement. The Court was persuaded, and so ruled. Now the Government argues that such a right of way is tantamount to a limited fee with an implied reversionary interest. We decline to endorse such a stark change in position....